This Act provides additional collection flexibility to a city, county, municipality, state, or other political subdivision to contract with one or more third party collections vendors for collection of delinquent government debt at no direct cost to such government agencies, and with no increase in government taxes at any level. This act would also provide authority to collect any and all delinquent tax, non-tax, and other delinquent debtor obligations from both individuals and businesses located both in- and out-of-state.

Model Policy

Section 1. {Short Title} This Act shall be known and may be cited as “The Enhanced Delinquent Debt Collection Act of 20XX.”

Section 2. {Definitions}

For the purposes of this act the following terms shall have the following definitions ascribed to them:

(A)“Delinquent government debt” is defined as past due tax, non-tax, and other debtor obligations due to a government entity from both individuals and businesses residing in or outside of {cite city, municipality, or state}.

(B) “Add-on fee” is defined as a fee added to the outstanding delinquent debt amount, which is charged to the debtor to offset the cost of collection.
(C) “Best qualified vendor” is defined as vendors that have responded to a formal Request for Proposal or similar request for offers, that best meet the requirements of the procurement, and will be awarded the contract(s) as long as the proposed collection fees do not exceed the maximum allowed by law.

(D) “Collection metrics” is defined as a program to evaluate the success of a third party collection vendor, which includes industry accepted measures, such as the percentage of debts collected, the amount collected, the time to collect such debts, “netback,” and other evaluative criteria

(E) “Cooperative contract” is defined as allowing the adoption and use of the terms and conditions of a “Master” extant contract between a government entity and one or more third party collection vendors without the second and subsequent government entities having to go to public bid. However, this assumes that the master cooperative contract was awarded in full and complete accordance with the state’s purchasing and procurement rules and regulations.

(F) “Netback” is defined as the total net return on collected delinquent debt.

(G) “Third party collections vendor” is defined as a private business entity registered to conduct collection business in (cite city, county, municipality, or state) and licensed to collect past due tax and non-tax debt in all 50 states.

Section 3. {Statement of Purpose}(A) It is the intent of the {cite political body} to provide the {cite government entity} with additional flexibility to implement and administer various methods for the collection of delinquent government debt. It is also the intent of this {cite political body} to grant authorization to {cite government entity}, at its discretion, to implement any or all collections methods and processes described in Section 4.

Section 4. {Implementation and Administration}
(A) The {cite government entity} is authorized to enter into agreements with one or more third party vendors to assist with the collection of delinquent government debt from individuals and businesses located both in and out of state.
(B) It is authorized that an add-on fee not to exceed 30% of the sum of the accumulated debt, plus penalties, interest and fees, being collected be added to the delinquent government debt to offset the administrative cost of collections.

(1) This fee shall be collected and retained by {cite government entity} or by the contracted third party vendor(s) (if applicable).

(2) This fee shall be paid to the {cite government entity} or contracted third party vendor(s) (if applicable) by the debtor.

(C) It is authorized that {cite government entity}, contracting with one or more third party vendors to conduct delinquent government debt collection may add, at {cite government entity’s} discretion, financial incentives to the contracts with vendor(s) that deliver superior collection results.

(D) Any contracted third party vendor(s) will provide such defined government debt collection services at no direct outlay costs to such designated government agencies.

(1) All third party collection contracts will be awarded in accordance with all applicable contracting and procurement procedures.

(2) Since fees, as defined above, are added to the defined government debt, and since such services are provided at no direct cost to government agencies, the accepted contract award evaluation standard is the “best qualified vendor” as defined above.

(E) Any delinquent government debt collection contract awarded by {cite government entity} should be for a minimum of three (3) continuous years and not to exceed five (5) continuous years.

(1) {Cite government entity} shall, at its discretion, have the option of one year extension(s) to any three-(3) or four-(4) year contract signed.

(2) {Cite government entity} may, with sixty (60) days’ notice, terminate the contract if the vendor does not perform in accordance with the terms and conditions of the contract.

(F) All debtor records provided to the third party vendor during the normal course of the contract, and in accordance with the terms and conditions of the contract, must be protected with absolute security in accordance with all applicable state and federal laws, rules, and regulations. As part of the contract procurement process, all third party collections vendors must provide in written detail how such debtor records are protected, and their previous experience protecting government debt records.

(G) Prior to any government debt being turned over to a third party collection vendor for debt collection, {cite government entity}is authorized to waive all or a portion of the penalties, interest, and fees on delinquent debt owed by the debtor to the {cite government entity} if such delinquent debt is fully and completely paid within a defined period of time, as determined by {cite government entity}, and if the {cite government entity} determines such action is in the best fiscal interest of the {cite government entity}.

(H) {Cite government entity} shall require a minimum of two annual reports per fiscal year detailing all collection activities to the government entity with direct management of the third party collections program, as well as to the designated legislative oversight committee.

(1) These reports shall use standard collections industry performance metrics including, but not limited to, both overall collection metrics and netback as described above.

(2) Such industry standard collection metrics and netback criteria will be described and defined in the contract between any government entity and the third party collection vendor(s).

(I) Preference shall not be given to a vendor based upon location, including but not limited to proximity to districts or other boundaries, except that the vendor shall be headquartered in the United States and shall perform the collection functions contracted within the United States.

(J) In order to insure the financial integrity of any third party vendor, all such vendor(s) submitting government collection offers to {cite government entity} within the state of {cite state} must provide, as part of the bid response, three (3) immediate past years’ worth of audited financial statements, complete with all respective notes and accompanying data.

(K) Every third party collections vendor submitting an offer to provide delinquent government debt collection services to any city, county, municipality, or other government entity within the state of {cite state} must detail any and all current or past adverse government actions, including fines assessed and any adverse rulings by any federal, state, or local government agency or court, regarding any and all collection activities of said third party collections vendor, including, but not limited to, private and government debt collection activities.

(L) Any government entity in the state of {cite state} seeking to enter into a contract with a third party collections vendor has the option of employing a cooperative contract as defined above. In addition, in order to appreciate economies of scale among government entities, such entities are encouraged to consolidate government debt collection functions for other city, county, municipality, or state governments.

(M) Any third party vendor contracting to collect any delinquent government debt on behalf of {cite government entity}must conform fully and completely to all applicable federal and state legislation, rules, and regulations promulgated by any federal, state, or local governmental agency.

(N) The prevailing law governing the contract between {cite government entity} and the third party vendor shall be the laws of the state of {cite state}.

Section 5. {Severability Clause}

Section 6. {Repealer Clause}

Section 7. {Effective Date}

(A) This Act shall become effective on {month day, 20XX}.

Adopted by the Tax and Fiscal Policy Task Force at the Spring Task Force Summit May 3, 2013